Council approves city income tax on high earners

Seattle City Council July 10, 2017

Council unanimously approved legislation today creating a city income tax on high-income households to move Seattle toward a fairer, more progressive tax system. The legislation (Council Bill 119002) is intended to reduce regressive taxes such as property taxes, and finance priorities like addressing the homelessness crisis and offsetting federal budget cuts. The legislation will place a 2.25% tax rate on income over $250,000 year for individuals, or $500,000 for married couples filing jointly. The tax will not affect any income earned below those thresholds, and is estimated to generate $140 million per year.

Councilmember Lisa Herbold (District 1, West Seattle & South Park), the legislation’s co-sponsor, said, “Seattle is a progressive city, but you wouldn’t know it by looking at our regressive tax structure, and that includes the taxes paid by small businesses. When our poorest households are paying 16% of their income in state and local taxes while our highest earners are paying only 2.4%, we have a very clear problem. Today we are taking a step in the right direction, toward tax fairness.”

Councilmember Kshama Sawant (District 3, Central Seattle), the legislation’s co-sponsor, said, “We live in a deeply unequal society. Throughout history, it has been mass movements of ordinary workers and young people, not the political representatives of big business, that have won change. Since I first ran for office, Socialist Alternative and I have organized for a $15 minimum wage, taxing the rich, and rent control. Our growing movement has now won $15 and taxing the rich. We can continue organizing to win not only rent control, but a world free of exploitation and oppression.”

The legislation requires the funds be used to:

lower the property tax burden and the impact of other regressive taxes;

replace federal funding currently received by the City that may be lost due to federal budget cuts;

Council set a goal of adopting legislation by July 10, 2017 in a resolution approved earlier this year. The income tax legislation was developed collaboratively between Councilmember Kshama Sawant (District 3, Central Seattle), Councilmember Lisa Herbold (District 1, West Seattle & South Park), Mayor Ed Murray, City Attorney Pete Holmes, and a coalition of advocates from the Trump Proof Seattle campaign.

City Attorney Pete Holmes said, “I recognize there may be challenges, but as your City Attorney I know we have assembled an outstanding legal team to craft the best legislation possible and defend it.”

According to a June SurveyUSA poll commissioned by KING-TV and KUOW, 66% of polled Seattle voters support a high earner income tax.

John R. Burbank, Executive Director of the Economic Opportunity Institute and member of the Trump Proof Seattle coalition said, “With this income tax, merely eight months after Trump was elected President, Seattle is again leading the way forward with progressive and equitable public policy which helps our citizens, regardless of the shenanigans in Washington DC!”

Unless challenged in court, the income tax on high earners will apply to income earned after January 1, 2018. Collection of 2018 taxes will begin April 15, 2019. After the Mayor signs the legislation into law, the City’s Finance and Administrative Services Department (FAS) will undergo a rulemaking process for implementation and administration of the tax. FAS will report back to Council with a finalized set of rules by November 15, 2018.